An investor in Collins & Aikman Corp.'s 10 3/4% '11 bonds sold a large position in the notes, causing the bonds to plummet 12 points to as low as 28, according to a trader. The bonds rebounded to 31 1/2. The identity of the seller could not be determined by press time. Collins & Aikman's bank debt also dropped three points to 94 1/2. The trader commented that there is a lot of short covering in the name and that the bonds were trading too high in the first place. Collins & Aikman posted a $22.7 million net loss in April 2006. "Collins & Aikman has always been an anomaly. It should never have traded where it did," he said. A company spokesman did not return calls seeking comment.
The debt of other auto companies also traded down last week in tandem with the decline in the equity markets. Delphi Corp.'s bonds traded down three to four points, despite the company agreeing with its former parent General Motors Corp. and its union the UAW to extend a new special attrition program to Delphi employees. A trader said the agreement was expected and did not cause much movement in trading levels. He said some hedge funds have sold positions in the bonds. "They are afraid things are going to get crushed. [The auto sector] is an ugly market," he said. GM's '33 bonds were down a point-and-a-half to 76 1/2. General Motors Acceptance Corp.'s '31 bonds were down two points to 93 1/4.